Buy Before GE Does — “Day in the Sun” for Solar Innovator (Tobin Smith)

By Travis Johnson, Stock Gumshoe, August 16, 2008

I haven’t written much about Toby Smith lately, though his ChangeWave rants are always good entertainment and he sometimes pulls a good idea to light for us (or at least pumps up the shares of a microcap stock). Bear markets aren’t usually a good friend to the kinds of microcap technology stocks he often likes to recommend, so many of his past recommendations that we’ve sleuthed out here are in terrible shape … but the heart continues to yearn for a blockbuster, no?

Let’s see if he’s got one for us this time.

In his own words …

“Well, I’ve been patiently waiting for one of the most exciting technology stocks out there to pull back so we could buy it for around $5-$6 and then sell it for $15-$18. For those of you who don’t want to do the math, that’s a 300% move.

“All the stars need to be aligned to get a stock like this at an attractive price, and in the past 60 days, we’ve seen that happen. That’s the beauty of bear markets — you get the chance to buy the best names at a huge discount.”

OK, good start — what does he tell us about the actual company?

“We had this company in our ChangeWave Investing portfolio two years ago, but we were a little early. After it sold one of its businesses to General Electric (GE), we decided to sell the stock and wait for the company to come up with its next big thing.

“Well, the next big thing was a solar technology that is twice as effective as existing technologies that lowers the cost of delivering electric power to 4 cents per kilowatt hour.”

“And I want to tell you that GE is already on the prowl. The company currently holds more than 600,000 shares, and I wouldn’t be surprised to see it buying more. You want to own this stock now to stay ahead of GE — because when it makes its move, the shares are going to explode.”

OK, so not a boatload of clues, exactly … but probably enough to feed the Thinkolator on a quiet Summer day.

We get another tidbit, however:

“The company also has a deal in the works with a major international manufacturing conglomerate to take its technology to China, India and across Asia in a big way.

“Including these catalysts, the company has up to six big announcements with utility companies …. If this company announces just three of these deals, its backlog should exceed $200 million.”

He compares the stock to Cypress Semiconductor, which enjoyed a nice run even as its own business faltered, largely because it owned SunPower and spun those shares off very slowly to reap some nice rewards (they still own a piece). Toby sees a spinoff or sale of this solar business, it sounds like, and we all know that GE has pretty deep pockets for technology that fits into their needs.

So what is it? A quick spin of the Thinkolator’s new Cognifuge attachment, and we’re able to determine that this is …

Emcore (EMKR)

Here’s an article from Tobin Smith about what he thought about Emcore last time he recommended it, in 2006 when the shares were somewhere in the neighborhood of $10. They’re just shy of $6 at the moment, and moving up (thanks, I’m sure, to the attention from Smith).

This is not as tiny as some of the companies he likes to tout in ChangeWave and his microcap newsletter, but it is a small cap to be certain — market cap is about $450 million, and they don’t have any debt. Or profit, to be fair, though analysts do see them making a small profit in the current quarter and in the next fiscal year (their year ends in September).

I don’t know much about Emcore’s technology and haven’t formed an opinion on the company yet, but it’s true that GE did buy one of their businesses back in 2006 (a LED lighting business called GELCore that had been a joint venture between the two companies), and that they do have a developing solar business — they developed some technologies to increase efficiency in space-based solar arrays, and have used that and another technology for concentrating solar power for use on the ground. The company does plan to spin off its solar business in an IPO next year, though of course there are no guarantees on that front (either that